Press Release

SCHAUMBURG, Ill.--(BUSINESS WIRE)--Nov. 6, 2012--
Sparton Corporation (NYSE: SPA) today announced results for the first
quarter of fiscal 2013 ended September 30, 2012. The Company reported
first quarter sales of $49.0 million, or a decrease of 5.4 %, from $51.8
million for the first quarter of fiscal 2012. Reported net income for
the first quarter of fiscal 2013 was $1.0 million or $0.09 per share,
compared to net income of $1.5 million, or $0.15 per share, in the same
quarter a year ago.

Cary Wood, president & CEO, commented, “While consolidated revenue and
earnings declined in comparison to the prior year quarter, this decrease
is due to the timing of U.S. Navy lot deliveries from our DSS business
as well as a shift of known demand within our CS segment from the first
fiscal quarter into the remainder of fiscal 2013. We continue to be
optimistic with the outlook for both the second quarter and the
remainder of the fiscal year.”

Consolidated results for the quarters ended September 30, 2012 and
2011:

For the Three MonthsEnded September 30,

($ in 000’s, except per share)

2012

2011

Net sales

$

49,020

$

51,833

Gross profit

7,213

8,344

Operating income

1,344

2,389

Net income

953

1,509

Income per share – basic and diluted

0.09

0.15

EBITDA

1,933

2,911

First Quarter Financial Highlights

•

Awarded 14 new business programs during the first quarter of fiscal
2013 with estimated future annualized revenue $13.4 million.

•

Quarter end sales backlog of approximately $156.1 million,
representing a 6% increase over the previous quarter and a 7%
increase over a year ago.

•

Medical business continued sales growth of 2.2% and gross profit
percentage improvement to 14.9% compared to 13.2% in the prior year
quarter.

•

July 2012 amendment and extension of the Company’s revolving credit
facility.

Segment Results

Medical Device (“Medical”)

Medical sales increased approximately $0.6 million in the three months
ended September 30, 2012 as compared with the same quarter last year.
Reflected within the increase is $3.2 million of increased sales to this
business unit’s largest customer, reflecting expanded demand for its
programs and additional refurbishment service revenue which began in the
second half of fiscal 2012. Additionally reflected is $1.4 million of
increased sales to another customer to meet increased demand for its
product in both the U.S. and Japan. Partially offsetting these increases
were decreased sales to three customers totaling $4.0 million dollars.
Decreased sales to one customer reflect the dual sourcing of certain of
its programs with the Company during fiscal 2012. Decreased sales to the
remaining two customers reflect these customers’ disengagements during
fiscal 2012. Mr. Wood stated, “Medical won three new projects from
existing customers during the first quarter with estimated future
annualized revenue $3.4 million.”

The gross profit percentage on Medical sales increased to 14.9% from
13.2% for the three months ended September 30, 2012 and 2011,
respectively. This improvement in margin on Medical sales reflects
certain favorable product mix between the two periods and increased
capacity utilization at the Strongsville, Ohio facility. Mr. Wood
continued, “Medical’s gross margin improvement is indicative of the
replacement of less profitable programs in the prior period with more
profitable sales from newer programs.”

Selling and administrative expenses relating to the Medical segment were
$1.5 million and $1.6 million for the three months ended September 30,
2012 and 2011, respectively. Medical reported operating income of $2.6
million for the quarter ended September 30, 2012 compared to operating
income of $1.9 million in the prior year quarter.

Complex Systems (“CS”)

Excluding an increase in intercompany sales of $1.1 million, CS sales to
external customers for the three months ended September 30, 2012
decreased $1.3 million as compared with the same quarter last year,
primarily reflecting decreased sales to one customer, which delayed
certain of its orders into future quarters. Mr. Wood commented, “Complex
Systems won five new programs from existing customers during the first
quarter with estimated future annualized revenue $1.7 million and
finished the quarter with its highest backlog in three years at $37.3
million. Additionally, this business segment has begun to apply the
successful business development model and business to business marketing
approach recently developed by our Medical business to its own sales
efforts. These new program awards, backlog and business development
methodologies should help drive revenue growth for this business in the
second half of fiscal 2013 and well into the future.”

The gross profit percentage on CS sales increased to 8.9% for the three
months ended September 30, 2012 compared to 8.7% for the three months
ended September 30, 2011. The quarter over quarter comparison primarily
reflects favorable product mix, partially offset by lower capacity
utilization at the Company’s Vietnam facility in the current year
quarter.

Selling and administrative expenses relating to the CS segment remained
consistent at $0.7 million for each of the three months ended
September 30, 2012 and 2011, respectively. CS reported operating income
of $0.4 million for the quarter ended September 30, 2012 compared to
operating income of $0.3 million in the prior year quarter.

Defense & Security Systems (“DSS”)

DSS sales decreased approximately $2.1 million in the three months ended
September 30, 2012 as compared with the same quarter last year,
reflecting decreased sonobuoy sales to foreign governments which can
fluctuate from quarter to quarter, partially offset by increased U.S.
Navy sonobuoy production and engineering sales and increased digital
compass sales in the current year quarter. Mr. Wood said, “While we
anticipated sonobuoy sales to foreign governments would be minimal this
quarter, we expected our U.S. Navy sonobuoy sales to be higher than was
achieved. The Company had two sonobuoy lots fail under suboptimal
environmental conditions which were outside of the product’s design
specifications at the Navy test range in the final weeks of September
2012. While these lot failures unfavorably impacted current year first
quarter revenues by approximately $3.5 million, it is anticipated that
these lots will be accepted by the Navy in the Company’s fiscal 2013
second quarter with revenues being recognized at that time.”

The gross profit percentage on DSS sales decreased to 14.6% for the
three months ended September 30, 2012 compared to 23.8% for the three
months ended September 30, 2011. Gross profit percentage was unfavorably
affected in the current year quarter by a significant decrease in
foreign sonobuoy sales and increased overhead expenses, partially offset
by the positive impact from increased digital compass sales as compared
to the prior year quarter. Mr. Wood continued, “Fluctuations in foreign
sonobuoy sales can have a significant impact on our gross profit
percentage as was demonstrated this past quarter. Foreign orders
totaling $8.2 million were received during the first quarter which we
expect to ship during fiscal 2013.”

Selling and administrative expenses relating to the DSS segment were
$1.1 million and $1.0 million for the three months ended September 30,
2012 and 2011, respectively, primarily reflecting increased business
development efforts in the current fiscal quarter. The Company incurred
$0.3 million and $0.4 million of internally funded research and
development expenses in the three months ended September 30, 2012 and
2011, respectively. DSS reported operating income of $0.5 million for
the quarter ended September 30, 2012 compared to operating income of
$2.2 million in the prior year quarter.

Liquidity and Capital Resources

As of September 30, 2012, the Company had approximately $43.1 million in
cash and cash equivalents, including $23.3 million of advance billings
received under U.S. Navy contracts in excess of the funding of
production to date under those contracts. The Company had no outstanding
borrowings against available funds on its $20 million revolving credit
facility. The credit facility is subject to certain customary covenants
with which the Company was in compliance at September 30, 2012.

Outlook

Sparton President and CEO Cary Wood concluded, “We remain optimistic for
fiscal 2013 and continue to expect year-over-year increases in both
revenue and profitability. Also, we maintain guidance that the second
half of fiscal 2013 will be stronger than the first half as seen in the
previous two fiscal years. As stated in the form 10-Q, we have just
recently signed a definitive Unit Purchase Agreement to acquire Onyx
EMS, with details being covered under a separate release. We are excited
with the addition of Onyx to the Sparton family and I look forward to
reporting on its successful integration and the progress with our other
growth initiatives in the future.”

Conference Call

Sparton will host a conference call with investors and analysts on
November 7, 2012 at 10:00 a.m. CDT to discuss its fiscal year 2013 first
quarter financial results, provide a general business update, and
respond to investor questions. To participate, callers should dial (800)
407-3269. Participants should dial in at least 15 minutes prior to the
start of the call. A Web presentation link is also available for the
conference call: https://www.livemeeting.com/cc/gc_min_pro_usa/join?id=Z3M3WC&role=attend

Investors and financial analysts are invited to ask questions after the
presentation is made. The presentation and a replay of the call will be
available on Sparton’s Web site: http://www.sparton.com
in the “Investor Relations” section for up to two years after the
conference call.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S.
generally accepted accounting principles (“GAAP”), Sparton Corporation
has provided a non-GAAP financial measure, EBITDA. EBITDA represents
earnings before interest, taxes, depreciation and amortization. The
Company believes EBITDA is commonly used by financial analysts and
others in the industries in which the Company operates and, thus,
provides useful information to investors. The Company does not intend,
nor should the reader consider, EBITDA an alternative to net income, net
cash provided by operating activities or any other items calculated in
accordance with GAAP. The Company's definition of EBITDA may not be
comparable with EBITDA as defined by other companies. Accordingly, the
measurement has limitations depending on its use.

About Sparton Corporation

Sparton Corporation (NYSE:SPA), now in its 113th year, is a provider of
complex and sophisticated electromechanical devices with capabilities
that include concept development, industrial design, design and
manufacturing engineering, production, distribution, and field service.
The primary market classifications served are Navigation & Exploration,
Defense & Security, Medical, and Complex Systems. Headquartered in
Schaumburg, IL, Sparton currently has five manufacturing locations
worldwide. Sparton's Web site may be accessed at http://www.sparton.com.

Safe Harbor and Fair Disclosure Statement

Certain statements described in this press release are forward-looking
statements within the scope of the Securities Act of 1933, as amended
(the “Securities Act”), and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Forward-looking statements may be
identified by the words “believe,” “expect,” “anticipate,” “project,”
“plan,” “estimate,” “will” or “intend” and similar words or expressions.
These forward-looking statements reflect Sparton’s current views with
respect to future events and are based on currently available financial,
economic and competitive data and its current business plans. Actual
results could vary materially depending on risks and uncertainties that
may affect Sparton’s operations, markets, prices and other factors.
Important factors that could cause actual results to differ materially
from those forward-looking statements include, but are not limited to,
Sparton’s financial performance and the implementations and results of
its ongoing strategic initiatives. For a more detailed discussion of
these and other risk factors, see Part I, Item 1A, Risk Factors and
Part II, Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, in Sparton’s Form 10-K for the year
ended June 30, 2012, and its other filings with the Securities and
Exchange Commission. Sparton undertakes no obligation to publicly update
or revise any forward-looking statement as a result of new information,
future events or otherwise, except as otherwise required by law.

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